IEA Supports G8 Energy Security Focus and Calls for Optimising Russian Natural Gas to Enhance Energy Security and Environmental Benefits

(Paris) — 18 July 2006

“The IEA welcomes the G8 focus on energy security and is honoured to support this global effort”, said Claude Mandil, Executive Director of the International Energy Agency (IEA), on his return from the G8 Summit in St. Petersburg. “We are delighted that G8 leaders have agreed to increase efforts to adopt ways that are technically feasible and economically justified to address tensions in energy markets and put the world on a more sustainable energy path”, Mr. Mandil added.

The G8 communiqué recognises the need for collective responsibility to address the world’s energy challenges including supply disruptions through stronger policy coordination. The G8 Outreach Session offered the opportunity for the plus 5 countries and international organisations including the IEA to offer their views on the principles espoused in the G8 Statement on energy issued on July 16. It is generally recognised that the real challenges lie in the implementation of the principles due to the world’s increasing energy interdependence and the special needs of the billions of people without adequate access to modern energy services.

Responding to the call of G8 leaders at the Gleneagles Summit in July 2005, the IEA Secretariat has developed an initial set of concrete actions to improve energy efficiency. These proposals - which were backed by G8 leaders in St. Petersburg - utilise existing technologies and are available at low or even negative costs and could bring about substantial savings both in terms of reduced energy demand and lower CO2 emissions.

“It is most apt that Russia, during its year as G8 President, chose energy security as a key focus for discussion”, said Mr. Mandil. “Russia has been a reliable supplier of oil and especially of gas over decades through politically turbulent times”, Mr. Mandil added. Given this emphasis on energy security, the IEA has been increasingly vigilant – not by questioning Russia’s commitment to energy market stability, but by seeking assurance of Russia’s ability to continue to do so. Russia is the world’s largest gas producer and exporter. “Its role in the emerging global gas market will only gain in importance, as growth is projected both in Russian domestic demand and in international requirements”, Mr. Mandil said. “As the country’s key producing fields decline, Gazprom’s ability to increase gas production is critical to maintaining international energy security”, Mr. Mandil added.

G8 leaders agreed on the need to reduce gas flaring globally. Currently around 150 bcm of gas is wasted through flaring each year, including a significant volume in Russia. The new IEA publication Optimising Russian Natural Gas: Reform and Climate Policy identifies synergies available between climate policy goals and the natural gas sector by examining the potential to reduce greenhouse gas emissions in the Russian natural gas sector and to limit natural gas flaring by oil companies. “The IEA estimates that at least 30 billion cubic meters – a fifth of the country’s exports to European OECD countries – could be saved annually by the introduction of more advanced, available technology and the implementation of energy efficiency”, Mr. Mandil said. Such investments would be all the more attractive as Russia would save an impressive amount of gas that could be used for export, thus raising the country’s benefits. They would also generate reductions equivalent to 150 million tonnes of CO2 equivalent that could be sold on the emerging carbon markets. “Russia’s ability to identify concrete projects that deliver greenhouse gas savings would furthermore be attractive to OECD countries seeking carbon trading opportunities”, Mr. Mandil added.

Much still needs to be done in Russia to take advantage of these opportunities and to translate their potential into commercial transactions. “We hope that this study will focus attention on these key energy policy needs, and foster a dialogue among Russian stakeholders, including government, domestic and international investors, Gazprom and gas consumers worldwide”, Mr. Mandil said. “In the spirit of the G8 Gleneagles Summit and in line with the focus of the G8 Summit in St. Petersburg, progress here would be a significant contribution to global energy security, economic growth and a cleaner environment”, Mr. Mandil concluded.

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